Opinion: Technical charts suggest another stock-market drop is coming

AviGilburt

With the market rally experienced over the past week, many in the media are now reconsidering their recent perspective regarding the demise of the bull market. Not only did the market strike the minimal upside target we laid out for members a week ago — once we broke through 2646 on the Emini S&P 500 — it even exceeded our minimal target by about 25 points.

However, just as the market has everyone now considering how much more upside we can see, I think we may be setting up for another drop to begin this week. Due to the lack of impulsive patterns evident off the recent lows in many of the charts I am following, it would suggest the stock market is likely going to see a retest of the prior lows, or a lower low before this wave (4) has run its course.

Again, I want to remind you that 4th waves are the most variable of the Elliott Wave 5-wave structure. For this reason, we almost have to expect many twists and turns, especially during the b-wave of that structure. Currently, we are still in the b-wave of this wave (4), and unless we see an impulsive drop below the 2700 support region on the S&P 500
SPX, -0.79%
we may remain in this b-wave for the next several weeks.

In other words, should we drop below the 2700 region this week in a corrective and overlapping fashion, we will likely be only dropping in a (b) wave within a larger b-wave, as presented in the attached charts in yellow. However, if the market does provide us with an impulsive structure below 2700 for wave 1 of the c-wave down, then we will likely be targeting the 2400 region within the next few weeks. Yet, the drop we experienced on Friday off the high was not clearly the start of an impulsive structure.

While the market has certainly struck the minimum target we set for this wave (4) between 2424 and 2539, the structure of the rally off that low is suggesting that this wave (4) will likely take more time and provide more whipsaw in the coming weeks. However, as long as we hold over the 2400 region support, my expectation is that we have a date with the 3011-3223 region for the S&P, which will likely be struck by the end of 2018 or early 2019. It will be at that point that I expect we can begin a 20%-30% correction.

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net, a live Trading Room featuring intraday market analysis on U.S. indexes, stocks, precious metals, energy, forex, and more, along with an interactive member-analyst forum and detailed library of Elliott Wave education.

Avi
Gilburt

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader, a live trading room featuring intraday market analysis on U.S. indices, stocks, precious metals, energy, forex, and more, along with an interactive member-analyst forum and detailed library of Elliott Wave education.

Avi
Gilburt

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader, a live trading room featuring intraday market analysis on U.S. indices, stocks, precious metals, energy, forex, and more, along with an interactive member-analyst forum and detailed library of Elliott Wave education.

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